What a Week!
Phew, what a week! Six difficult client matters handled, plus the usual admin and management issues.
Here’s a taster of the sort of work undertaken:-
A profitable private company owned by “mother and father”, now quite elderly and infirm, but being driven forward by two sons who do not really get on.
Inheritance Tax (“IHT”) a key issue, but the group structure (put in place by us a few years ago) should ensure that 100% Business Property Relief is available (so no IHT on the shares in the business).
Another key issue is managing the new 50% income tax rate. The shares are pregnant with gain, exacerbated by a previously made claim for CGT deferral relief in respect of property gains. A disposal of the shares will trigger CGT liabilities on the previously deferred gain, but currently only at 10%.
We’ll reorganise the shares into different classes and arrange for mum and dad to settle a suitable amount on trust for their children, grandchildren etc.
The small CGT liability will be easily compensated by the income tax that can be saved by passing dividends through the trust and out to low-taxpaying beneficiaries. The trust will need to be carefully drafted with revocable interests in possession to avoid the dreaded “tax leakage” that can occur; more on that in due course, perhaps.
Rush up to central London to meet a dental practitioner.
Following changes made to the splendidly named Dentists Act in 2006, dental practitioners can operate via limited companies, which is attractive for various reasons, not least, the ability to accumulate profits at corporation tax rates (21%, possibly) rather than at income tax rates (51% including NICs) and the possibility of selling goodwill so as to gain access to funds with only a 10% personal tax charge.
The good doctor also wants to expand further, which will need financing.
Happily, we have good contacts with a major South African bank that is active in this area, so its all systems go!
A long awaited settlement meeting with HMRC concerning issues discovered at a PAYE compliance visit.
Three very aggressive HMRC officers need dealing with diplomatically. This is achieved with a certain amount of determination and good humour, and interest and penalties are substantially mitigated.
There are some stark lessons regarding the controlling of expenses and the recording of the usage of “pool cars” that could well be applied to a number of clients. The major positive step is the promise of their looking sympathetically at our application for a “dispensation”, so that, going forward, large amounts of expenses for most individuals will not need to be reported on forms P11D.
That will make everyone’s life easier!
Back up to central London to meet a client concerned about the increasing income tax and CGT rates (who isn’t?).
He has a niche consultancy business, which operates as a partnership and now draws a reasonably large pension resulting in 50% tax.
He also has managed to wangle various potentially valuable stock options, which fall outside the rules on Employment-related securities but with the CGT net. It is doubtful that gains on these will be taxed lightly under the Coalition Government’s proposals.
The solution seems to be to incorporate the business, so that income and gains can be accumulated at 21% corporation tax, rather than 50% income tax and an unknown, but probably high, rate of CGT.
Action will be taken after 22 June, when the rules will be better revealed in the Emergency Budget.
Another day another client.
This time a wealthy individual (and wife) with an investment property portfolio throwing off more income than they need (and more than they want to pay 50% income tax on!).
I suggest incorporating the property business – they will form NewCo and subscribe for a few ordinary shares and then transfer the properties to NewCo in consideration for the issue of redeemable preference shares.
No CGT, tax-free uplift to the value of the properties in NewCo and accumulation of rental profits at 21% rather than 50%. The lawyers believe that there is a potential SDLT liability at 4%, but are placated when I explain the SDLT reliefs for partnerships in Schedule 15 FA 2003. Another happy client!
A successful trading company with valuable trading properties.
Can we completely separate the properties from the trading activities? Yes, via a rather complex scheme of reconstruction that will require the acquiescence of the bank and clearance from HMRC.
Good news! The bank is happy with the proposals (subject to our agreeing to their rather usurious terms) and an HMRC clearance application is drafted for the client’s approval.
The race is on to get matters wrapped-up before the end of August.
Should be a shoe-in.
Weekend arrives – can’t wait to see our rugger team thrash the Aussies and our soccer team thrash the yanks – no worries there at least.
And so to bed…Talk to Barnes Roffe today